Why Google Should Buy Palm

With terrible sales and no sign of turnaround, Palm's options are whittling down to one: buyout. Ex-Appler Phil Kearney sees a buyer in Google, which, in its looming megawar with Apple, might need Palm as much as Palm needs it.

In looking at the brewing battle between Apple and HTC, it is interesting to me to see everyone asking if and when Google will get involved. I think that Google will eventually have to get involved and that is exactly what Apple is anticipating. I worked at Apple for seven years guiding their home wireless development and innovation and I can tell you first hand that folks at Apple are crafty, deliberate and thoughtful. People are exactly right in assuming that Google is going to have to eventually get involved if for no other reason then the fact that some lawyer worth his salt at HTC wrote the contract with Google such that contract has indemnification clauses which require Google to get involved and Apple knows that.

Even if Google has no indemnification obligations to HTC, the Apple/HTC patent war has to be more about Android and Google than anything else. Apple doesn't want a cross-patent agreement with HTC because HTC only has a relative handful of patents. Apple has over $US30 billion in the bank so they can't possibly want money from HTC. So what could motivate Apple to want to sue HTC? I'm in agreement with those who theorise that Apple's HTC suit is to warn hardware manufacturers against using Android in their new product offerings. But in thinking about this issue, the one way I see that Google might be able to combat such a move would be to acquire some good patents of their own. In perusing some of the articles on the web about the Apple/HTC battle, a couple of them referred to older articles that talk about Palm and the possible patent battles between Palm and Apple. It is interesting that an Apple/Palm patent battle has not materialised thus far and, combined with Palm's recent announcement about cutting guidance, it got me thinking: Why doesn't Google just buy Palm, it's a no-brainer?

I understand that some people might think it would be too expensive for another company to buy Palm just for their patents, but when you get right down to it Palm is a cheap acquisition, even at a premium over the roughly $US800 million that they're worth today. With a market cap of over $US180 billion, Google would be spending less than 1 per cent of their market cap on Palm and they would get a lot more in return than just the patents. Nokia or Motorola too could both easily afford to buy Palm with a hefty premium just to get their patents and it wouldn't be an overly large investment either company. To me, the price is right and the opportunity cost of not buying Palm is just too high for anyone, including Google, that wants to compete in the post-PC world of the second decade of the 21st century and beyond.

There are a myriad of other reasons too why it makes sense for Google to buy Palm and this looming patent war with Apple simply adds impetus to such a decision. Think about all of the good things that Google would get out of buying Palm. Google gets every tool which it currently lacks but needs to successfully try to compete with Apple in the smartphone and other post-PC businesses over the long haul.

First and foremost, Google gets all of Palm's patents and we know their patent pool is both large and effective. Palm has been at this for nearly twenty years, giving them lots of patents including some older patents which nicely counter any patent claims Apple could make. It could be very likely that the reason we've never seen any direct patent battles yet between Palm and Apple is because Apple's legal folks looked over the Palm portfolio and decided that Apple infringed on as many Palm patents as Palm did on Apple patents so that a patent war with Palm wasn't really a good idea.

If this is the case, then Google getting ownership of Palm's patent portfolio could be paramount given that Apple's attack on HTC looks to me personally a lot like the Austro-Hungarian invasion of Serbia or the German invasion of Belgium at the beginning of World War One. Like the start of that awful war, this Apple/HTC battle could lead to a much larger conflict especially given that there was already a Nokia/Apple battlefront opened earlier. If for nothing other than their patents, Google should buy Palm. But beyond the patents, Google would get many more tools that they need if they hope to compete with Apple in the long term in the smartphone arena.

Google would also get a solid group of WebOS software developers, many of whom actually developed the first iPhone OS while at Apple and could have been involved in filing many of the original iPhone patents. In addition, if we look under the hood of WebOS and Android then we can see that they are cousins in terms of architecture and implementation. Both WebOS and Android are children of Linux and pretty closely related which means that the folks who developed WebOS could jump right in and augment the core developers of Android. Or perhaps Android and WebOS could be molded together to form one operating system that Google could formally licence to all of the hardware manufacturers out there who are looking to use Android on their platforms today. Using the WebOS team, Google could combine all of the great WebOS features with Android and would have an even better operating system for their own hardware and potential licensees.

But that's not the only software advantage that Google gets through a Palm acquisition. By making Google employees of the entire WebOS team, it also gives Google a ready group of new shock troops to help them go to battle with Apple. Yes the WebOS folks at Palm would be a welcome addition to Google to help staff up their increasing Android development needs, but let's not forget that the key folks who left Apple after creating the original iPhone OS all jumped off the Cupertino Mothership to go to Palm for a reason. They were evidently unhappy with something, so I bet they'd have no problem contributing to any war effort against Apple.

Beyond augmenting Google's Andorid OS development capabilities with an influx of new team members, the acquisition of Palm also gives Google a brand new capability. It gives them the mobile phone hardware design capability that they're currently relying on folks like HTC to do for them. Farming out one's hardware development is no way to compete with the iPhone. Heck, neither is farming out your software development and the mobile phone design incumbents like Nokia and Motorola have finally woken up to this fact. To directly compete with Apple in any credible way over the long term, a company needs to own and control all of the engineering components needed to create a good smartphone platform. There is a crack team of hardware engineers & designers over at Palm, some of whom came over directly from Apple too. Google needs a hardware group for future Android products and the Palm hardware team fills that need very nicely. I know some folks have gotten Palm phones with bad screens or keyboards, but let's not confuse bad design with bad manufacturing. I think the Palm hardware designs are good but the contract manufacturer in China may not be not doing enough quality control on parts and assembly.

Google also gets a couple of other pieces of the business about which I think people who have never developed mobile phones always seem to forget. First among these is Palm's entire carrier relations team. Having a whole department full of people with years and years of experience in managing the relationships with all the carriers such as AT&T, Verizon, China Mobile and Vodaphone is a business capability that shouldn't be taken lightly and, come to think of it, had Apple had such a group when originally developing the iPhone perhaps all of their US customers might not be stuck to only being on the AT&T network.

Then there is the technical support capability and support infrastructure that Palm has built over the years to teach the carriers how to support each new mobile phone that Palm releases. I've heard a couple of the support horror stories about the Nexus One and if they are true then Google needs all of the help it can get in training and supporting the technical support organisations of each mobile phone operator that decides to carry their Android phones.

I have lots of friends at Apple and I have lots of friends at Palm so I don't want it to seem like I'm just trying to paint Apple as the bad guy here or trying Palm as desperate. I want more than anything for my friends at Palm to be successful. But I can't believe for a second that I'm the only one thinking this Palm acquisition idea over. I have to imagine that there's a team at Google, one at Microsoft, one at Nokia and Motorola too and even one at Apple who are going through this same analysis. I have to also imagine that they are all coming up with the same conclusions. Acquiring Palm could do a lot to shore up any smartphone business and make that company a serious competitor in the marketplace over the coming decade. To me though, only Google just seems to be the right fit at the right time for a Palm acquisition. Palm gives Google everything they need to make Google-branded Android smartphones serious competitors to the iPhone. But will it happen? Only time will tell.

Phil Kearney is the wireless networking geek who built the AirPort Extreme, AirPort Express and Time Capsule when he worked at Apple. He got his first Apple II computer in 1980 at age 13 and has been an Apple fan ever since. In his spare time he drinks great wine, eats fantastic food and is known to play a good bit of online poker.